Slade,
If you read Sec. 2607(c)(4) there is no mention of "office space", "employees", "initial capital" or other criteria set-forth in the 10 point Policy Statement.
The court, "The statute establishes three prerequisites for this safe harbor, and everyone agrees that the defendants in this case (several realty companies and title companies) satisfied them."
The argument was that a "fourth condition" fashioned through a "policy statement" trumped the statute!
The court in the 3rd to last paragraph of the decision stated:
"Purpose at any rate is a two-edged sword, and in this instance it furthers our interpretation. Consider the purpose of the safe harbor. As the policy statement itself explains, the statute as first enacted created legal uncertainty about profiting from referrals to affiliated companies. Congress created the affiliated-business-arrangement safe harbor to eliminate this uncertainty. The statute’s precision in defining the boundaries of this exception reflects this objective. A multi-factor inquiry that seeks to distinguish bona fide providers from shams in new ways would reintroduce much of the uncertainty the safe harbor meant to eliminate."
My point is that governmental agencies are extending and modifying congressional legislative intent and not simply by rule promulgation but with such methods as policy statements. It's the method and application that fails, not that sham businesses are OK.
My simple contention is that congress needs to adopt the 10 points in Section 2607 should a majority vote be supported by the underlying constituency.
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